County ofSan Diego Health and Human Services Agency HHSACalFreshProgram Guide Number Page SelfEmployment Income 63225 1of 4 Revision Date 07012022 Background Federal law requires selfemployment income to be counted as earned income in the determination of CalFresh benefits Purpose This section defines what selfemployment income is and how it should be calculated The section is being relocated to the income chapter It is being revised to incorporate the language for gigeconomy contractor income and merge information regarding boarders Policy Selfemployment income is considered earned income and must be determined on a casebycase basis Individuals who work and receive an Internal Revenue Services IRS form 1099 for their earnings or files taxes as selfemployed are considered selfemployed Staff must not restrict selfemployment to a particular type of employment or limit selfemployment to how income taxes are filed If a customer states they are selfemployed staff must consider them selfemployed unless it is questionable For example a customer states they are an independent contractor and staff find this questionable staff should check with the parent company to see if it considers the customer to be selfemployed or an employee 1 Types of SelfEmployment Selfemployment income shall include but is not limited to Type Independent Contractor GigEconomy Contractor Description An individual who provides goods or services to another entity under a specific contract or agreement The independent contractor is not subject to the control of the entity they are performing the services for There is no employeeemployer relationship An independent contractor paid on a per task basis for a job that is usually coordinated in conjunction with an online or applicationbased tool provided by a third party Examples include but are not limited to UBER Lyft Postmates and DoorDash Individuals working in the gigeconomy often receive payment via direct deposit The total payment amount deposited may not reflect the gross income amount earned prior to deductions including various fees charged by a thirdparty including application fees Income verification such as a paystub physical or electronic earnings statement or notification of pergig gross payment must be requested from the applicant or recipient For tax filing purposes gigeconomy contractors will receive IRS Form 1099MISC for total services performed for the year Note Healthcare subsidies paid to the gigeconomy contractor must be counted in the gross income County ofSan Diego Health and Human Services Agency HHSACalFreshProgram Guide Number Page SelfEmployment Income 63225 2of 4 Rental Property Capital Gains Farming or Fishing Roomer Room Rental Boarders NonCommercial Owning a property and renting it out when a member of the household HH is actively engaged in the management of the property at least an average of 20 hours a week Refer to section 63223 on how to treat rental income if a HH member is not actively engaged in managing the property The proceeds from the sale of capital goods or equipment shall be calculated in the same manner as a capital gain is calculated for federal income tax purposes Note If the capital gain amounts are obtained from the federal income tax forms count the entire proceeds of the sale as gross income even if only 50 percent of the proceeds are taxed for federal income tax purposes Farmers and fishermen who anticipate at least 1000 in annual gross income are entitled to offset a selfemployment farming or fishing loss from other countable income A loss occurs when the annual net selfemployment income is determined to be less than zero Deduct the loss from any other countable HH income accordingly 1 Offset farm or fishing selfemployment losses first against other selfemployment income 2 Offset any remaining farm or fishing selfemployment losses against the total amount of earned and unearned income after the earned income deduction has been applied A HH in the business of renting rooms which receives payment for the rental of rooms in the home the HH resides in The 20 hours a week management provision does not apply to a room rental See Section 2 below for determining the cost of doing business for room rental Note When two or more HHs split the rent and all members of the HH are listed on the lease whether one member pays a portion of the rent to the other or to the landlord directly is a shared living situation not a roomer Income from boarders includes all direct payments to the HH for the boarders room and meals Shelter expensespaid directlybythe boarderto an individual outside the HH must not be considered income See Section 2 below for determining the cost of doing business for a boarder and Section 631018 for more information on boarders 2 Costs of Producing SelfEmployment Income All selfemployed customers are given a deduction from their gross selfemployment income to cover the cost of producing the income The customer will choose one of the following deduction types Actual business expenses or 40 percent standard deduction The customer may choose the option that is most advantageous for them Only one deduction type may be chosen at a time and will be applied to all sources of selfemployment Customers are allowed to change the method of deduction only at recertification or every 6 months If the customer chooses actual business expenses all expenses must be verified If the customer states they want to use actual business expenses but does not provide verification allow the 40 percent standard deduction The following are examples of allowable and nonallowable business expenses County ofSan Diego Health and Human Services Agency HHSACalFreshProgram Guide Number Page SelfEmployment Income 63225 3of 4 Allowable Business Expenses Costs of goods supplies and materials Livestock seed and fertilizer Workrelated clothing Payments on the principal of the purchase price of incomeproducing realestate capital assets equipment and machinery Businessrelated vehicle expenses and transportation costs incurred while on the job including the cost of maintaining the vehicle mileage tolls gasoline insurance Advertising costs Postage Cost of maintaining a job site including a room in ones home allow only the portion used for business as a deduction calculate in same manner as room rental business expense Telephone and electricity costs Bookkeeping and payroll costs Employee wages and salaries Employee taxes State and local sales tax paid Professional licenses andor permits necessary to practice a trade or profession Insurance premiums on equipment and real estate used in producing income Taxes on income producing property business profit taxes and other mandatory businessrelated taxes Thirdparty fees Webbased application or platform fees NonAllowable Expenses Depreciation claimed for tax purposes Net losses from previous periods Federal state and local income taxes Money set aside for retirement purposes Personal expenses not related to the business such as transportation to and from work meals clothing entertainment etc Wages salaries and advances paid to the business owner Costs of maintaining a business in the individuals place of residence such as rent utilities and property taxes are not allowed if the client already receives these shelter and utility deductions in their CalFresh budget Any expense that exceeds the payment a HH receives from a roomer or boarder for room rental and room and meals If a customer is selfemployed as a day care provider and they choose actual business expenses the cost of meals provided must be calculated as follows Business Expenses Meals Options The current reimbursement amounts used in the Child and Adult Care Food Program CACFP or Standard amount based on estimated permeal costs Note If a customer reports being selfemployed and having a child or adult daycare and they receive a reimbursement under CACFP please elevate to CalFresh program County of San Diego Health and Human Services Agency HHSACalFreshProgram Guide SelfEmployment Income Number Page 63225 4 of 4 If a customer is selfemployed renting to roomers or boarders and they choose actual business expenses the cost of doing business must be calculated as follows Business Expenses Options Meals The maximum CalFresh allotment for the number of boarders or The actual verified separate and identifiable cost of providing meals if the actual costs are greater than the maximum monthly CalFresh allotment for the number of boarders Room Square footage of the home or Number of rooms Note Refer to Room Rental Business Expense Desk Aid for calculations References CFR 27311a 27311b MPP 6350341 ACIN I0302 I7304 I3706 I7309 I8409e I3119 Sunset Date This policy will be reviewed for continuance by 07312025 Approval for Release Rick Wanne Director SelfSufficiency Services